Here's What To Make Of Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s (DSM:QGTS) Decelerating Rates Of Return

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating Qatar Gas Transport Company Limited (Nakilat) (QPSC) (DSM:QGTS), we don't think it's current trends fit the mold of a multi-bagger.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Qatar Gas Transport Company Limited (Nakilat) (QPSC) is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.063 = ر.ق1.9b ÷ (ر.ق33b - ر.ق3.0b) (Based on the trailing twelve months to March 2021).

Thus, Qatar Gas Transport Company Limited (Nakilat) (QPSC) has an ROCE of 6.3%. In absolute terms, that's a low return and it also under-performs the Oil and Gas industry average of 8.0%.

View our latest analysis for Qatar Gas Transport Company Limited (Nakilat) (QPSC)

Above you can see how the current ROCE for Qatar Gas Transport Company Limited (Nakilat) (QPSC) compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Qatar Gas Transport Company Limited (Nakilat) (QPSC).

What Can We Tell From Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s ROCE Trend?

There hasn't been much to report for Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Qatar Gas Transport Company Limited (Nakilat) (QPSC) doesn't end up being a multi-bagger in a few years time. This probably explains why Qatar Gas Transport Company Limited (Nakilat) (QPSC) is paying out 47% of its income to shareholders in the form of dividends. Unless businesses have highly compelling growth opportunities, they'll typically return some money to shareholders.

What We Can Learn From Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s ROCE

We can conclude that in regards to Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s returns on capital employed and the trends, there isn't much change to report on. Although the market must be expecting these trends to improve because the stock has gained 65% over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

If you'd like to know about the risks facing Qatar Gas Transport Company Limited (Nakilat) (QPSC), we've discovered 1 warning sign that you should be aware of.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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